The UK government’s incoming reforms to agricultural property relief (APR) and business property relief (BPR) has stunned generational farming families who now face uncertainty as to how the increasing inheritance tax (IHT) burden will impact the long-term viability of their estates. While these reforms aim to refine the tax system, they have sparked significant questions around fairness and workability, which STEP agrees should be addressed through wider engagement with the communities most impacted.

STEP recently provided a proactive paper to HMRC on the changes signalled to APR and BPR, in which we highlight several critical policy and technical issues, in addition to calling for further clarification and collaboration.

You can read the full paper here

The GBP1 million threshold: too low, and unworkable

The introduction of a GBP1 million threshold for combined APR and BPR relief has been widely critiqued by industry bodies and associations, particularly within the agricultural sector. We echo their view that this cap is set too low.

Family farms, often asset-rich but cash-poor, already face tight margins. The threshold risks placing additional financial and administrative strain on estates. Increased valuation costs and probate delays could exacerbate an already challenging situation. These unintended consequences could disproportionately affect generational farming businesses, undermining their viability at a time when resilience is sorely needed.

Transferability of relief: a missing piece

One glaring omission in HMRC’s current guidance is the transferability of the GBP1 million threshold between spouses across APR and BPR assets. This flexibility is vital. Allowing unused relief to be transferred could significantly ease the financial and administrative pressures on family estates, providing much-needed certainty and support. Without clear confirmation from HMRC on this point, families and their advisors are left in limbo, unable to plan effectively for the future. We urge HMRC to address this gap promptly.

A need for wider consultation

Policy changes of this magnitude demand input from those they will impact most. We strongly support calls for broader consultation with the agricultural sector and estate planners to ensure these reforms are practical and equitable. Clear, precise guidelines and definitions from HMRC are essential for mitigating confusion and inconsistent application. We stand ready to contribute to this process, leveraging our members’ expertise to help shape a framework that works for taxpayers, advisors and administrators alike.

Allocation of the threshold: clarity is essential

A key question remains unanswered: how will the GBP1 million threshold be allocated between APR and BPR assets? Will it apply separately to each category or be shared across both? For estates with a mix of agricultural and business property, this lack of transparency creates uncertainty. HMRC must provide detailed guidance on how different asset types will be assessed to ensure fair treatment and enable effective planning. Family farms, already anxious about the potential fallout of these changes, deserve reassurance that the system will not penalise their unique circumstances.

Valuation delays: an overstretched system

HMRC’s increased emphasis on valuations raises serious practical concerns. The valuation resources in England, Wales and Scotland are already stretched thin, with delays commonplace. This policy shift is likely to trigger a surge in demand for valuations – yet there’s little evidence HMRC is prepared for the influx. What steps are being taken to bolster these resources? Without adequate support, estates could face prolonged probate processes and mounting costs, further compounding the pressures on family-run businesses.

A call for collaboration and clarity

Our paper is a proactive measure to assist the government in ensuring these reforms are implemented thoughtfully. We recognise HMRC’s objectives but stress that success hinges on addressing these critical issues: a higher threshold, transferable relief, robust consultation, clear allocation rules and a valuation system fit for purpose.

The viability of family farming and generational businesses rely on policies that support, rather than hinder, their sustainability.

We look forward to working constructively with HMRC in the coming months to refine this policy.

Ben Bell, Government Affairs Manager at STEP